Characterising Ocone local martingales with reflections

Abstract : Let $M = (M_t)_{t \ge 0}$ be any continuous real-valued stochastic process such that $M_0=0$. Chaumont and Vostrikova proved that if there exists a sequence $(a_n)_{n \ge 1}$ of positive real numbers converging to $0$ such that $M$ satisfies the reflection principle at levels $0$, $a_n$ and $2a_n$, for each $n \ge 1$, then $M$ is an Ocone local martingale. They also asked whether the reflection principle at levels $0$ and $a_n$ only (for each $n \ge 1$) is sufficient to ensure that $M$ is an Ocone local martingale. We give a positive answer to this question, using a slightly different approach, which provides the following intermediate result. Let $a$ and $b$ be two positive real numbers such that $a/(a+b)$ is not dyadic. If $M$ satisfies the reflection principle at the level $0$ and at the first passage-time in $\{-a,b\}$, then $M$ is close to a local martingale in the following sense: $|{\bf E}[M_{S \circ M}]| \le a+b$ for every stopping time $S$ in the canonical filtration of ${\bf W} = \{w \in \mathcal{C}({\bf R}_+,{\bf R}) : w(0)=0\}$ such that the stopped process $M_{\cdot \wedge (S \circ M)}$ is uniformly bounded.
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  • HAL Id : hal-00722112, version 1
  • ARXIV : 1208.0111

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Jean Brossard, Christophe Leuridan. Characterising Ocone local martingales with reflections. Séminaire de Probabilités, Springer-Verlag, 2013, Lecture Notes in Mathematics, 2078, pp.167-180. ⟨hal-00722112⟩

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